So you want more Tech? It should go both ways

We have all heard the stories of delayed appraisals and the shortage of appraisers. With these stories came the most amazing arguments from lenders and AMCs:      “We need appraisal waivers and we need better technology. We need to embrace technology and use it in any way we can.”

While there is no shortage of appraisers and there is no need to waive appraisals, lenders and their AMCs have created one of the biggest ghost stories in the history of the appraisal profession. What’s even better, while they’ve created this story—and claim the need for faster and better use of technology—they’ve failed to apply technology in their own right.

Again, according to the AMCs and lenders they need faster and cheaper products. These companies spout off about the need to have technology be more involved in the appraisal process. The concern is not about the quality of an appraisal, rather how fast they can get an appraisal to their client. An AMC’s client is the lender. If they don’t meet the demands of the lender, they lose that client and the money that comes with it. Hence most, if not all, AMCs try to find the appraiser who will work FASTEST and CHEAPEST (hence, the “best” appraiser for the job).

It’s all about them and their bottom line. They spout off saying we need more TECHNOLOGY to make things better and faster. They will reference Zillow which we all know is so accurate (sarcasm), reference tax records, and now want NON-licensed people inspecting properties to speed up the appraisal process. Yes, these non-licensed “inspectors” are coming to your home, pretending to be an appraiser, gathering data to send to an actual appraiser in order to make things faster and cheaper.

Let’s have more TECHNOLOGY, they say. Things will be better and faster, they say. Technology is the wave of the future, they say. Is that it? Yes, let’s listen to the lenders and AMCs who have only themselves in mind; lenders only looking to close loans and AMCs who are looking to please their clients any which way they can.

Technology is the one thing these AMCS and lenders have hung their hat on. They continue to push for more data, more computers, and less expertise. They want things done fast, however they will not pay someone to do it properly. Instead, they’ll push to find someone cheaper, less experienced, and willing to do anything to stay in the AMC’s good graces to continue to get work.

Technology is what they want. They want new ways to do things, more computer driven models/AVMS to spit out faster decisions without any regard for the quality or accuracy of the data presented. Technology….

Appraisers constantly hear about technology from AMCs or lenders and how it will benefit the appraiser and the consumer, but we NEVER hear about how technology could be used by AMCs to help in another area: how appraisers can be paid on time, faster, and more efficiently.

AMCs typically pay appraisers by check 30-90 days from the day they completed the report. I know. Pretty insane. There are some that pay faster however they are few and far between. So these same companies that want faster and cheaper in the lending process, take weeks if not months to pay the appraiser for their services. These same companies pushing technology can’t seem to use it themselves. Is this because they skim a portion of the fee off the top of the appraisers fee? Might they have an account earning the AMC money while the appraiser’s money acquires interest? Valid questions.

I don’t know the precise answer here, but I do know that a private party who calls me to do an appraisal PAYS me at the time of the inspection. Sometimes even before hand. And yet these companies can’t pay the appraiser ASAP at delivery of the report? Are they too waiting to get paid by the lender? Many AMCs collect fees directly from the borrower without the lender being involved, while many as well get their money via the lender. Yet they need to stall 30-90 days to have the appraiser’s check signed and mailed? Am I missing something here? AMCs want advances in technology yet still pay by paper checks?,

The same companies that want faster and better still rely on ancient methods of payments while they cite technology as the way to go forward. So by their standards they want fast and more but cannot even pay an appraiser in less than 30 days?

AMCs are proving more and more each day why there is a backlash amongst appraisers for them to be involved in the appraisal process. They want technology advancement but can’t seem to figure out how to pay an appraiser in under 30 days? Making a bad situation worse, AMCs like Appraisal Loft, Coester VMS and some others, have gone out of business owing millions to appraisers who never see the money they’ve earned and who are left to suffer the consequences of greed and poor business practices. 

AMCs contract with lenders to deliver an appraisal. Some lenders collect payment and send it to the AMC to pay the appraiser. Some contracts allow the AMC to collect, payment from the borrower without the lender being involved, so it should be easier for the AMC to pay the appraiser quickly. Instead, we are all left waiting until that check is written and sent. This in turn has created the ghost story that there is an appraiser shortage. See there is no shortage of appraisers, only a shortage of appraisers who are willing to put up with the cheap fees offered by AMCs, the lack of timely payments by AMCs, and the ongoing lies and deception the AMCs provide. (NOTE: Not all AMCs operate this way however most do. We are speaking of the exploitive majority of AMCs.)

Back to Technology… what a great word. You want to talk technology, lenders and AMCs? Lets talk. VENMO, PAYPAL BUSINESS, ACH/DIRECT DEPOSIT, ZELLE, SQAURE, QUICKBOOKS, STRIPE and others. This is technology that allows you to PAY your appraisers at the moment you receive the report. Your lenders pay you for your work before you even make an appraisal assignment. The moment the job is done, an appraiser could be paid from funds you’ve already collected.

It’s tiresome to hear that you haven’t received payment yet from the lender or consumer. That’s NOT our issue. Don’t feed us the “we only cut checks every 2 weeks to 30+ days” story. You scream everyday you need a rush job done, or need someone to complete a report and can’t find anyone, however you never follow through with your part and pay us the way we should be paid. We are independent contractors. Not employees.

Technology. It’s a powerful word that you Lenders & AMCs throw around like it only matters to you. How about this….When you accept technology and decide to pay appraisers FAST and pay them customary and reasonable fees, maybe, just maybe, you too will have a valid point. Until then, stop it. I challenge all AMCs to USE the technology of which you speak, and if you use it correctly to pay Appraisers, I’m sure your ghost story of a shortage of appraisers will disappear.

Missing: Invoice For Appraisal Services

Typically when you sell a service, you include an invoice to the buyer or consumer for the services you provided.  This invoice lays out the products sold, the quantities, and services provided as well as the price or fee charged.

The invoice is a vital part of any business. It is an official document that businesses use to show the terms of the agreement, it specifies the buyer of the product or services, and it documents the terms of payment. An invoice allows businesses to keep track of payments made or outstanding payments due. Some business will even tack on fees if the invoice is not paid within a proper amount of time stated on the invoice.

As a Real Estate Appraiser and business owner, I always include an invoice to my clients for their records, and mine as well, and that invoice is always attached to the appraisal report—my product—when I deliver it to the client. When I say ALWAYS I mean my private clients. (“Private” means consumers hiring me directly or a direct lender who does not use an Appraisal Management Company or AMC).

You see, there is an issue with AMCs and the process of using invoices which we will get to in a bit.

For those unfamiliar with AMCs, they are the appraisal middleman companies put in place after the housing crash of 2008. Their intended purpose was to serve as a firewall between appraisers and lenders. They were to manage the appraisal ordering process by assigning orders to appraisers, doing some quality control before the report is delivered to the client (the client being the lender), and paying the appraiser for doing the appraisal report. While this sounds like a good idea, it has turned into a mess.

The mess I speak of is this: The AMCs make their money by tacking on a fee beyond the appraiser’s fee or they simply bill the lender and then take a portion of that stated appraisal fee.

For example: A lender is told the appraisal will cost $600. The lender agrees and the process begins. The AMC then does two things. First, they take the portion they claim for their services out of that total fee. Second, they set out to find an appraiser willing to accept the assignment for the lowest fee possible so that the AMC can make a larger profit. What they don’t tell the lender is how much of the “appraisal fee” the AMC keeps versus how much the appraiser is actually paid.

Some states like Georgia have laws requiring that the appraisal report specify both the AMC fee and the fee paid to the appraiser. While this is a good thing, without reading the entire report, the lender/borrower may not see where the fee actually went. It gives the impression that the AMC is the entity that developed the appraisal and wrote the report.

This brings me to the whole point of this post and one word: TRANSPARENCY. Where is the invoice that would break down the fees paid and to whom? Where is the invoice that states the terms of payments? It’s missing from the report. Why is that? I’ll tell you why. Most AMCs specify in their engagement letters that the appraiser is NOT to include an invoice within the report. Some will have the appraiser upload it separately and some will bypass an invoice altogether. Why is that?

It’s part of business right? You get an invoice for your lawn service, from your mechanic, from other businesses that you order products from online and so on. So why are appraisers not allowed to send an invoice attached to their appraisal product with the stated fees for their service? The answer is simple… AMCs don’t want to make it easy for you the lender or the borrower to know where the money went and for what. It makes it easier for the AMC to take more of the fee they quoted for the appraisal and pay the appraiser less. Imagine being charged $600 for an appraisal. The appraiser would normally charge,  say $350, for that service. You’ve just paid $250 to a middleman to manage an order. Did you know that? As a lender or a borrower, are you being told the appraisal would be $600 or are you being told it will cost $350 with a $250 fee to the AMC for whatever they do? Are you aware of the breakdown of the costs? Probably Not.

Another aspect of the problem is this: The Bid Request Are you aware that many AMCs broadcast bid requests to many appraisers at once? Specifically to find the cheapest so that they can retain more of the total fee? Probably not. The AMC sends out requests for bids on a job, although they’ve already charged you $600. If they look long enough, they’ll find an appraiser who will do the appraisal for $250, and the AMC has a minimum fee of $100 per order. They charged you $600 for the Appraisal. That leaves $250 left over. Shouldn’t the borrower be given a refund for that $250.00? I would think so, however it’s my guess that $250 will go into the pockets of the AMC. Are you okay with this? I know I wouldn’t be.

This is where transparency comes into play and the invoice breakdown will show just that. To be fair, not all AMCs practice this behavior. Some actually only take a set fee for their service, pay the appraiser customary and reasonable fees, and they disclose to the appraiser the fee breakdown. But there are very few of these reputable AMCs out there. Ask any appraiser. 

This practice of not including an invoice needs to stop. Consumers have the right to know where their money has gone and for what.

A recent House bill has been introduced and assigned to the Financial House Committee, which is a positive step in the right direction. In short:

The bill states that all fees SHALL be stated on the settlement statement and broken down into appraiser fee and AMC fee. Now lets take this one step further and start allowing appraisal business owners to include an invoice with the fee breakdown in ALL reports. While the AMC may not be able to hide this from the consumer, they are still hiding it from the appraiser. Why?

It’s time for another change. It’s time to allow all parties involved in the process to know who is charging what fees and for what. Is there some big secret the AMCs are hiding from appraisers? Will allowing the appraiser to know what the AMC is making be an issue?

The solution is simple: Separate the fees paid to the AMC and the appraiser. Allow appraisers to include an invoice on every report that breaks down the fees for services. If this practice of AMCs charging a fee then paying a separate fee to the appraiser is to continue, then its only right that it be disclosed on an invoice for all parties to be in the know. Then again, AMCs need not take money off the top of the appraiser’s fee or add money to it to make a profit. This fee should be paid to them separately. If lenders want to use an AMC ( which they are NOT required to do) then the AMC and the lender should have an agreement in place regarding the AMC fee to be paid per order. The Appraiser fee should be what the lender/appraiser deems acceptable in their market for the scope of work and service provided, and should be paid directly to the appraiser from the borrower or from the lender, NOT THE AMC. AMCs should never have to touch any money owed to an appraiser and if the reason is unclear, please see these two previous blog posts: